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Although the year of 2022 was very dramatic for the crypto asset market, the development of digital assets continues, and it is important to better regulate the cryptocurrency ecosystem to mitigate the damage and harness the potential possibilities and benefits of digital assets. This paper analyzes the recent market developments and their associated risks, as well as regulatory and supervisory developments. Cryptocurrencies’ growth has been volatile. Although the size of crypto market itself is not necessarily pose a financial stability risk, the lack of regulation, growing interlinkages within the market and with regulated financial institutions might. Second crypto winter and substantial risks to market integrity, consumer and investitors' protection, and financial integrity which occurred, put pressure on authorities all over the world to enhance their supervision and regulation of the crypto market. Given the cross-border nature of crypto assets, the absence of global standards, the lack of common taxonomies and reliable and consistent data on markets, make regulation, supervision and enforcement particularly challenging. Developing a comprehensive and complex regulatory framework designed to support responsible innovation, focused on consumer protection and anti-money laundering while managing risks – especially those that could disrupt the financial system and economy - requires close cross-sectoral and cross-border cooperation. |
